Foreign aid funding cut by $95 million

The federal government quietly chopped another $95 million out of Australia's foreign aid effort last month.

The Department of Foreign Affairs has confirmed that Australia's share of the latest round of funding to the International Development Association, the World Bank’s lending arm, will be cut from $830 million to $735 million.

DFAT insists that Australia is still paying its fair share to the fund, that provides loans in an effort to help poor nations develop their economies, but aid experts say they are puzzled by the thinking behind the cut.

The cut to the IDA’s three-year funding cycle is expected to be part of an overall reduction of $4.5 billion in Australia's foreign aid effort over the next four years.

According to DFAT, Australia’s contribution to the development fund will remain at about 1.8 per cent of the total funding for the next three years but Stephen Howes, Director of the Development Policy Centre at the Australian National University says the cut makes little sense.

“It is not clear why the World Bank was singled out for a cut, especially given its focus on economic development, a key priority for the Coalition,” Professor Howes said on Thursday.

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“Probably the reason is simply that the “supplemental” contribution of three years ago was an easy target.

“But that is hardly a satisfactory rationale.”

DFAT’s statement says Australia is continuing to meet its obligations.

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“On 17 December 2013, Australia pledged to maintain its burden share to the seventeenth replenishment of the World Bank’s concessional lending arm, the International Development Association,” the statement says.

"Consistent with our earlier contribution…our burden share will be 1.80 per cent for contributions to IDA loans and grants, and 1.61 per cent for IDA’s debt relief initiatives.

“Australia will also meet its expected obligations for the Multilateral Debt Relief Initiative.

“How this pledge equates in dollar terms remains subject to confirmation by the World Bank, but is expected to be in the order of $735 million.”